Rising demand from AI data centers is fundamentally reshaping the supply-demand dynamics and pricing mechanisms of the global memory chip market.
KeyBanc Capital Markets analyst John Vinh published a report following his Asia research trip, noting that high-bandwidth memory (HBM) prices are expected to rise 80% to 100% quarter-over-quarter in the first quarter of 2027, DRAM prices will increase 15% to 20% quarter-over-quarter in the fourth quarter of this year, and NAND prices will rise by approximately 20%. Meanwhile, memory suppliers are significantly shifting capacity toward data centers, and the supply of memory for PCs and smartphones is expected to decrease by 20% to 30% next year as a result.
The trend of supply locking is intensifying simultaneously. Vinh noted that HP and Dell have already extended their supply agreements to 2031, and Google is negotiating a long-term agreement covering through 2035, indicating that the sustainability of this memory upcycle far exceeds previous ones. Previously, reports noted that approximately 80% of Samsung Electronics' memory chip capacity for next year has already been locked up through long-term supply agreements in advance, with tech giants such as Nvidia, Google, and Microsoft competing for the remaining approximately 20% of capacity, and market bargaining power is rapidly shifting toward suppliers.
HBM Leads the Rally, DRAM and NAND Rise Across the Board
KeyBanc's Asia research findings show that demand from AI and data centers remains robust, creating a structural memory shortage and driving prices higher across the board.
Vinh expects DRAM prices to rise 15% to 20% quarter-over-quarter in the fourth quarter of this year, NAND prices to increase by approximately 20%, while HBM price increases will be the most aggressive, projected to rise 80% to 100% quarter-over-quarter in the first quarter of 2027.
The capacity allocation strategies of memory suppliers are the core driver of rising prices. Vinh stated that suppliers plan to shift more capacity toward data centers, which will cause memory supply for PCs and smartphones to decrease by 20% to 30% next year, further squeezing available supply in the consumer electronics market.
In terms of beneficiaries, Vinh believes the research findings are most positive for Micron, and he also raised earnings forecasts for analog chip manufacturers, including Analog Devices, Microchip, Texas Instruments, and NXP.
In the analog chip sector, Vinh stated that industrial and data center demand is strong, the overall trend for analog chips is better than expected, and lead times for some products have extended to approximately 26 weeks, with certain categories even reaching up to a year. Based on this, he raised earnings forecasts for Analog Devices, Microchip, Texas Instruments, and NXP.
However, Cirrus Logic was the exception in this research. Vinh downgraded the stock from "Overweight" to "Sector Weight," citing that approximately 80% of its revenue depends on Apple, and Apple has reduced its wafer starts at TSMC, equivalent to cutting production capacity for 15 million to 20 million iPhones.
"As a result, CRUS's growth outlook over the next 6 to 12 months appears limited," he wrote. Additionally, Vinh noted that due to high memory prices, Cirrus Logic's diversification efforts into the PC market, which it had originally pinned its hopes on, may also be forced to delay.
Long-Term Agreement Landscape Expands, Lock-In Periods Extend to 2035
The trend of supply locking has become a key characteristic distinguishing this memory cycle from historical ones.
In his report, Vinh noted that HP and Dell have extended their supply agreements to 2031, and Google is negotiating a long-term agreement extending to 2035. He believes this development indicates that this memory upcycle has stronger sustainability.
Reports noted that approximately 80% of Samsung Electronics' memory chip output (including HBM) for next year has already secured buyers through long-term supply agreements, and tech companies that have not yet signed can only compete for the remaining approximately 20% of capacity. Samsung Electronics stated during its second-quarter earnings call that "almost all major customers are applying for long-term agreements," and admitted it is "difficult to respond to all demand."
Samsung is not alone — SK Hynix has completed long-term agreement signings with major customers; Micron Technology's strategic customer agreements increased from 16 in the second quarter to 26 in the third quarter; and NAND flash manufacturer SanDisk has also signed long-term agreements with eight customers, including several large tech companies.
The formation of this trend has its structural background. Quarterly contracts and spot transactions have long been the norm in the semiconductor industry, making it difficult for chip manufacturers to predict future pricing and demand trends. As global tech companies significantly ramped up AI data center investment this year, stable memory supply assurance has become a primary strategic priority for tech giants, and the long-term agreement model has thus accelerated in adoption.
Long-Term Agreements Spread Across the Entire AI Infrastructure Chain
Reports noted that the wave of long-term agreements has broken through the boundaries of memory chips and is spreading across the entire AI infrastructure industry chain.
In the components sector, Samsung Electro-Mechanics is about to sign a long-term supply agreement worth 700 billion Korean won (approximately $507 million) for multilayer ceramic capacitors (MLCC) with Delta Electronics, which would be its seventh such agreement completed this year, with cumulative orders this year expected to reach 4.6 trillion Korean won (approximately $3.33 billion). LG Innotek is also engaged in long-term agreement negotiations for flip-chip ball grid array (FC-BGA) substrate supply.
Similar patterns have emerged in the power and cooling infrastructure sector. LS Cable & System has signed a five-year busway long-term agreement with U.S. tech companies including Meta and Google; HD Hyundai Electric is advancing long-term agreement negotiations for data center transformers; and LG Electronics has signed a chiller supply contract worth 5 trillion Korean won (approximately $36.2 billion) with U.S. AI data center infrastructure company Air.
In the memory sector, five years has become the standard base term for long-term agreements, accompanied by annual rolling one-year extension clauses. High advance payments of 20% to 25% have become industry practice, along with strict mandatory purchase clauses — even if customers fail to take delivery, they must pay as agreed. Suppliers sometimes use these advance payments as a funding source for large-scale fab construction.
As manufacturers' capacity expansion struggles to keep pace with demand growth, the supply-demand imbalance continues to widen, and market bargaining power has shifted significantly toward suppliers. This model reflects the deep alignment of interests between tech giants and component manufacturers: the former seeking stable supply chains, while the latter use it to hedge capital expenditure risks.
Comments